CVS-Aetna deal is about catching up to UnitedHealth

Business news writers have done their best to make the CVS Health acquisition of health insurer Aetna sound like it’s going to reshape health care. But at the industry’s leader, UnitedHealth Group, executives have probably already finished the review of their strategic plan in light of the dramatic merger news.

Maybe they even changed a word or two.

What CVS wants to do is not reshape a multi-trillion dollar industry but just try to catch up with UnitedHealth. Of the two competitors, the one to bet on is the one that doesn’t need to operate a big network of brick-and-mortar stores.

The union of Aetna and CVS, a $77 billion deal still months many away from closing if it closes at all, would bring together a venerable company that serves roughly 22 million people in its medical plans with a pharmacy business with almost 10,000 retail pharmacy locations and about 1,100 MinuteClinic walk-in clinics.

What’s at least as important as the plans for Aetna members in the stores, though, is putting Aetna’s health insurance operation together with the back office of CVS and its big pharmacy benefits management business, now called CVS Caremark. There is much to be gained by integrating a health insurer with a pharmacy benefit manager, both to save a lot of money on drug costs and to help members more effectively manage their own health.

Minnetonka-based UnitedHealth, of course, is a big health insurer with just such an in-house operation. Its OptumRx business is one of the three giants in this market, along with CVS and a pharmacy benefits manager called Express Scripts.

The people who should be looking over their strategic plan this week, maybe even starting over with a blank whiteboard, are the executives running Express Scripts.

Other than operating stores, it’s just not easy to point to any potential initiative that could come out of the CVS-Aetna combination that UnitedHealth isn’t already doing. UnitedHealth has its own MinuteClinic concept, too, and apparently it even now has more than a dozen of its MedExpress urgent care clinics inside Walgreens stores.

“Management describes the early results under these pilots as being a win-win for Optum and Walgreens,” said analysts from Credit Suisse, in a research report from last week.

Many of the initiatives of UnitedHealth, and a major rationale for putting together CVS and Aetna, are about helping the members of health plans get a lot better at managing the kind of ailments many of them will have for the rest of their lives, like high cholesterol or elevated blood pressure.

For years it was understood that maybe half of American adults lived with at least one chronic condition, defined as the kind of health problem that needs to be treated or limits a person’s ability for a year or more, but the most recent study from RAND Corp. concluded it was more like six in 10 American adults.

The stereotype people might have is of seniors lugging around a tote bag of pill bottles, but the RAND study found that about half of Americans in their mid-40s to mid-60s live with multiple health conditions, too.

RAND highlighted an active and working 44-year-old being treated for fibromyalgia, asthma, anxiety and other conditions that required nine prescriptions per day, some presumably for the rest of her life. Its point in describing this case was that she was not particularly unusual.

People with chronic conditions can be expensive to take care of. The 12 percent of Americans who live with five or more of them account for 41 cents out of every dollar spent on health care.

A big part of that, of course, is what they (and their insurer) spend on their medications, but they also go to the doctor a lot. This is very old news to the people who run health insurance companies like UnitedHealth.

The approach to keep them healthier and bring down costs that seems to work best is an integrated approach to helping people better manage their health. And UnitedHealth is simply ahead of CVS at delivering that and still will be after this deal closes.

UnitedHealth’s OptumRx unit oversees the pharmacy benefits of more than 65 million people, processing more than 1.25 billion prescriptions every year. At last count it had about 22 percent of the market, just a bit behind CVS. OptumRx has been notably good at lowering the costs of expensive specialty drugs for Medicare members, according to Credit Suisse.

As just one example of a recent initiative to control drug costs, UnitedHealth has introduced a quick way for doctors and other clinicians to do a quick trial claim before writing a prescription for a patient. Some medications require an insurance authorization before being prescribed, so with a few clicks the doctor can ask for that.

The tool will also point to cheaper, comparable medications that would cost the patient — and the health care system — a lot less.

Another idea behind CVS’ plan for the Aetna deal is having the health care insurer get far more active in helping patients manage their own health, rather than get sick enough to decide to visit their doctor and then have the health insurer pay for more complex and expensive care.

Communicating with members when they visit a store, maybe just minutes away from home, can be a great way to help share with them what CVS and Aetna know about effectively managing their heart disease or diabetes.

CVS Chief Executive Larry Merlo tried to explain a little of that thinking to investors in a Monday conference call about the merger, although he did not disclose a plan to take that idea a big step further by making house calls, only a “perhaps” in response to a question.

At UnitedHealth, the idea of using house calls has long since been implemented, of course. By the end of the month, it hopes to have made 1.2 million home visits just this year.

lee.schafer@startribune.com 612-673-4302

Lee Schafer joined the Star Tribune as columnist in 2012 after 15 years in business, including leading his own consulting practice and serving on corporate boards of directors. He's twice been named the best in business columnist by the Society of American Business Editors and Writers, most recently for his work in 2017.